New Farm Bill's Impact On U.S. Pork Industry

The major features of the six-year Farm Security and Rural Investment Act (FSRIA) of 2002 that relate to the swine sector are summarized here, although the full impact will remain uncertain until USDA regulations have been issued. Many of the provisions in the bill will take effect immediately, while others will be implemented beginning in 2003. There are three general areas that could have an impact

The major features of the six-year Farm Security and Rural Investment Act (FSRIA) of 2002 that relate to the swine sector are summarized here, although the full impact will remain uncertain until USDA regulations have been issued. Many of the provisions in the bill will take effect immediately, while others will be implemented beginning in 2003.

There are three general areas that could have an impact on pork producers' businesses — crop policy, new conservation provisions and country of origin labeling of meat products. Although there were other provisions intensely debated, like the packer ban on livestock ownership, they were not included in the final bill.

Crop Provisions

Livestock producers will likely continue to enjoy low feed costs under the new farm bill. Estimates by the Food and Agricultural Policy Research Institute (FAPRI) suggest that feed costs will remain nearly unchanged, compared to the continuation of policies contained in the 1996 farm bill.

One word of caution remains for livestock producers, however. Grain stocks will still be at low enough levels that the threat of a short crop will drive feed costs higher. FAPRI's full analysis of the new farm bill can be found on their Web site at: www.fapri.missouri.edu.

The new bill provides crop producers with the opportunity to update base area and program yields. The combination of loan deficiency, fixed and counter-cyclical payments provided for in the new bill should provide checks to crop producers similar to those seen in recent years under the 1996 farm bill and ad hoc disaster payments. Adjustments to government expenditures under these provisions could occur if they do not fall within our current World Trade Organization (WTO) commitments.

The new farm bill increases the cap on Conservation Reserve Program (CRP) acreage to 39.2 million acres from the previous cap of 36.4 million acres. Other conservation provisions, like the Conservation Security Program that pays producers for using good farm and ranch stewardship practices, are included as well.

More EQIP Funding

Funding of the Environmental Quality Incentives Program (EQIP) is increased under the new bill to $1.3 billion by the 2007 fiscal year, compared to the $200 million spent annually under the 1996 farm bill. Sixty percent of the total EQIP funding is targeted to livestock producers.

An individual producer or entity cannot receive more than $450,000 during the fiscal 2002 to 2007 period for all EQIP contracts entered into with USDA.

One reason for the increase in EQIP money for livestock producers is to help offset the cost of new Concentrated Animal Feeding Operation (CAFO) regulations that the Environmental Protection Agency (EPA) will issue by Dec. 15, 2002. EPA estimates that annual costs to the livestock sector could total near $1 billion under the proposed CAFO rule issued in January 2001.

Country of Origin Labeling

The farm bill contains a provision requiring retailers of pork products to inform consumers of the product's country of origin at the point of final sale. Beef and lamb are included, too. This provision will not include products sold by foodservice establishments.

The country of origin provision is voluntary for the first two years. The Secretary of Agriculture is required to issue final mandatory regulations no later than Sept. 30, 2004. This portion of the new bill could be one of the most important for the swine sector.

For pork products to be labeled “Made in the USA” the pig must be exclusively born, raised, and slaughtered in the U.S. This restriction calls into question how to label the over three million, Canadian-born feeder pigs that are finished in the U.S. annually. Depending on final regulations, this could markedly change the movement of feeder pigs. It is unlikely that a clear answer to this issue will occur until final regulations are issued.

USDA will be busy over the next several months implementing all of the provisions contained in the FSRIA of 2002. As regulations are issued, the bottom line of what the new farm bill means to the swine industry will become clearer. To keep track of USDA's progress, check out their farm bill Web site at: www.usda.gov/farmbill.